➤ China expresses 'deep regret' over currency manipulator label from U.S.
➤ China central bank intervenes to back yuan.
➤ Asian shares extend losses, while U.S stocks rise, alongside European shares.
➤ Australia dollar gains, as central bank holds rate.
U.S stocks rose, alongside European stocks, on Aug. 6 as China stepped in to contain the weakness in yuan, which depreciated below 7 per dollar for the first time in over a decade on Aug. 5.
Wall Street reversed yesterday's losses, with the S&P 500 and Nasdaq 100 trading 0.9% and 1.3% higher around 9:30 a.m. ET.
In Asia, the Shanghai SE Composite dropped 1.6%. Japan's Nikkei 225 and Hong Kong's Hang Seng closed down 0.7% each.
Chinese central bank on Aug. 6 expressed "deep regret" over the U.S. decision to label China a currency manipulator, saying the yuan exchange rate is determined by market forces. The People's Bank of China added Aug. 6 that "China has never used and will not use [the yuan] exchange rate as a tool to deal with the trade frictions."
Meanwhile, the People's Bank of China on Aug. 6 set the yuan's daily reference rate at 6.9683 per dollar, below the level market participants were expecting.
The timing of the yuan breaching the 7 per dollar threshold in light of further tariff threats from U.S. President Donald Trump has given credence to the idea that China is weaponizing its currency amid the trade war with the U.S., said Julian Evans-Pritchard, senior China economist at Capital Economics.
The PBoC also announced that it will issue yuan-denominated bills worth a total of 30 billion yuan on Aug. 14 in Hong Kong.
While the yuan bill sales are part of a regular issuance, "the amount is larger than needed to simply replace maturing bills, so should provide some boost to short term Chinese rates, and thereby to the [yuan]," according to Robert Carnell, ING Research's chief economist and head of research of Asia-Pacific.
In Europe, Germany's DAX rose 0.3% and France's CAC jumped 0.8% around 9:30 a.m. ET. Shares of Deutsche Post AG climbed 4.2% in Germany after the company lifted the lower end of its operating earnings guidance for full-year 2019. Vivendi SA jumped 5% in France as the media conglomerate said it is in talks with Tencent Holdings Ltd. for the sale of a 10% stake in Universal Music Group Inc.
Among currencies, the Chinese yuan erased earlier losses to rise 0.4% higher against the dollar. The dollar index, which measures the U.S. currency's performance against a basket of major peers, gained 0.2%.
China's Commerce Ministry said that Chinese companies have stopped buying U.S. agricultural products, adding that Beijing is currently not ruling out the option of imposing new duties on imported U.S. farm products.
The Australian dollar appreciated 0.4% against its U.S. counterpart as the Reserve Bank of Australia maintained its cash rate at a record low of 1.00% while reiterating its readiness to ease policy further, if needed.
The central bank is expected to slash rates to 0.5% by early 2020, wrote analysts at Capital Economics.
Sterling rose 0.2% versus the dollar amid reports that a no-deal Brexit is Boris Johnson's "central scenario" and that he does not intend to renegotiate the divorce deal.
The Japanese yen was down 0.6% against the dollar after data showed Japanese wages fell for the sixth consecutive month in June. The euro was stable versus the dollar.
Among commodities, Brent crude rose 1% to $60.38 per barrel on the ICE Futures Exchange. Gold increased 0.1%.
In the bond market, the yield on 10-year U.S. Treasurys added 5 basis points to 1.760% around 9:49 a.m. ET. The yield on German bunds with the same maturity shed 2 basis points.
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The day ahead:
10 a.m. ET – U.S. JOLTS (Econoday consensus: 7.293 million)
1:05 p.m. – U.S. Fed's James Bullard speaks
10 p.m. ET – Reserve Bank of New Zealand rate announcement